Tax Question about new car purchase

Hi,

I'm not sure how to show my new car purchase for tax purposes.

Do I;-

1) add the total cost of the new car purchase as a cost (minus 95% personal usage) or2) add the new car purchase as a cost (minus 95% personal usage) minus the part exchange of my old caror3) show the monthly payments (which I am making an a loan) as a cost for the new car

:?

Thank you in advance.

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03-02-11 13:32:33

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Re: Tax Question about new car purchase

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Re: Tax Question about new car purchase

You account for depreciation on the car as a capital write down, talk to your tax office for the latest rates.

There will be a percentage of the cars value you can offset as an expense, so for example if your car cost £10,000 and the capital write down is 25% you add 2,500 to the capital write down part of your tax form. This will then be offset against your income tax.

In the second year you write off the percentage on the remaining £7,500 and so on.

If you sell your car for more than the amount it has been written down, for example; £8,000 at 1 year old, you will have a capital gains liability on the extra £500 above the write down value you sold it for.

You can also claim back the interest part of your loan as an expense against tax.

I would suggest making an appointment with your tax office and taking all of your receipts and loan agreements with you. They will help you put the correct figures in the correct boxes.

Re: Tax Question about new car purchase

I was advised by HMRC that you can claim the total cost of a driving school car as an expense in year 1 as a one off expense. When you trade the car in, the trade in value should be shown as income to offset against the cost of your next car.

Re: Tax Question about new car purchase

Re: Tax Question about new car purchase

There was a point where you could write down your car 100% in the first year and anything you sold the car for after this would be subject to capital gains tax because your asset gained value against the value you last told the tax man about.

This all gets confusing because Instructors don't tend to keep full accounts with a Balance Sheet as well as Profit and Loss accounts. The balance sheet is a good indicator of the value of capital and assets in a business which is different to the money in and out side of a business.

I would suggest talking to your tax office about your own circumstances.